Jerry Bowyer on his Evolution to the Gold Standard
Q: In your Forbes.com column last October 23, My Friendly Debate With Allan Meltzer, the World’s Leading Monetarist, you observed “I’ve softened in my view towards the gold standard. It used to be that most of the writing that I did about the gold standard was negative. I’m beginning to wonder if one could ever really have the moral force in the political arena around an equation like the Taylor Rule, which is an admirable equation, that one could have over something that’s got basically over 4000 years of recorded history behind it, which is a reliance on gold. I’ve come to see the gold standard as maybe the only real hope we’d have of getting some kind of price stability, given the fact that it’s so easy to manipulate theories and to manipulate equations, but it’s not easy to manipulate the supply of gold.”
How would you describe your view towards the gold standard today?
A: In a word, committed. I’ve never been contemptuous towards the gold standard position. I’d say I’ve gone from respectfully suspicious to neutral, to surreptitiously supportive, to agreeable, to committed. In that order.
Q: What was the basis of your original resistance?
A: Primarily, ignorance. Secondarily, inadequate defense from some highly visible promoters of the gold standard. Jude Wanniski comes to mind. I’d say that the intellectual basis was that I was concerned about scenarios in which growth in gold stocks varied greatly from the production of goods and services. I’d say scenarios like the one which occurred after the ‘discovery’ and looting of gold and silver from the New World led to a century of price inflation in Europe were a big part of my skepticism.
Q: What led to the transformation of your views?
A: In two words: smart friends. Seth Lipsky convinced me that gold and silver were the constitutional requirement. The US Constitution is our public covenant and our public officials are bound by it. Period.
George Gilder’s wonderful new book Knowledge and Power gave me the mathematical/theoretical push I needed on the matter of economic theory. In order to have information transferred some things need to be fixed and stable so that variations can be noticed and decoded. That’s the basis of information theory. The cable must be a stable channel so that my TV or computer can distinguish the channel from the signal. Money must be stable. It’s the channel for information. It has to be a baseline against which market price signals can be decoded. Otherwise you can’t distinguish between noise and information. Gold is the most stable channel.
Lew Lehrman (not yet a friend) made me care about it. First he made me see that inadequate defenses of gold as some kind of perfect monetary Polaris were not the only basis of the standard. Gold doesn’t have to be perfect to win. It just has to be better than any of the other contenders. Lehrman also helped me to understand the thought of Jacques Rueff, who showed us all that much of the carnage, loss and destruction of the great depression, wars and genocides of the bloody 20th century came from departing from the classical gold standard.
Q: You have referenced Witherspoon’s essay on money, which is an important, too little read, document. Did it have an impact on your thoughts, and, if so, in what way?
A: Witherspoon, in the new edition of his monetary writings published by my friend Gary DeMar, showed me that the founding fathers did not default to the gold standard out of pure mechanical habit or tradition. They reasoned their way back to it out of suffering, misery and ruin which they had imposed on themselves by paper money. He also taught me that clergy can, and should, be at the forefront of the rediscovery of a virtuous monetary system.
To be continued.
Interview originally published on The Gold Standard Now.